All Forum Posts by: Tarik Turner

Quote from @Ryan Sajdera:

@Tarik Turner probably not. I just don't see why the bank cares HOW the rest of the equity arrives. I mean, the seller is willing to carry back 30%. What risk does the bank have with a fully rented apartment complex at 70% loan to value? 

Just as an FYI Here are some reasons why over leveraging a property is an issue

1. Increased Default Risk: When a borrower has a high level of debt relative to the property's value, they are more likely to default on the loan if they encounter financial difficulties. This poses a significant risk to the lender, as they may not be able to recover their full investment if the property is foreclosed and sold.
2. Also take into consideration Decreased Cash Flow. High levels of debt can lead to higher monthly mortgage payments, which can reduce the property's cash flow. This can make it challenging for the property owner to cover operating expenses, make necessary repairs and improvements, or save for unexpected costs. Over-leveraging can leave a property owner with little financial flexibility.
   
3. Also in the case of needing to refinance the property down the line there will be difficulty in Securing Financing. Lenders are less likely to approve loans for properties with excessive leverage and might not meet the leverage max for most lenders

Can you do at least 10% down? Banks do not like properties that are over leveraged especially in this market, where most expect values to roll back. 

Each lender can differ in regards to this situation. Some may want all members of an entity to have credit and background run as well as sign off on the loan, while others will go by ownership %. Speak with your mortgage lender/professional and find out what their criteria is prior to submitting entity documents

If this is an investment property most lenders can offer max LTV based on as is value after 6 months. Some can go as low as 3 months

It would depend on your strategy. Setting up individual loans would make it a bit easier to sell the properties individually down the line. Also might fetch you slightly better rates. Putting the properties under a blanket loan could also have some benefits

The other thing to consider here. If your friend's experience is as a contractor on those projects and not as an investor lenders may not count those projects towards required experience.

I believe he is referring to your margins typically in regards to your total costs, you don't want to be all in for more than 75% of the ARV (Especially in a market that might roll back)
75% of 150k = 112k (where you want to be with costs)
Your total costs 95k+25k= 120k (not including closing costs and holding costs)

Property would have to be held in an LLC and you would have to be added to the LLC as a member, the previous owner would also have to remain as a member

what area are you investing in?

Do you have a tenant living in the property or is it a STR?